Why Franchise Systems Fail

Every year business owners take the leap into franchising. For many of these business owners franchising brings great success, however that is not always the case. Some of them are gone before you know it and this may leave you wondering what the hell happened. In our opinion, these businesses should have never been franchised in the first place (see “Dangers of Franchising Your Business Too Soon”). So how did these franchise systems fail? For purposes of this article let’s first define franchise failure as: a franchise system that no longer offers franchises or the franchisor who simply gave up. Let’s explore some of the common characteristics we have noticed that typically show up in failed franchise systems. 

Failure at Launch

Some franchise systems fail before they ever gain traction because there were no efforts made to advertise and market their franchise opportunity. In reality, money must be spent to advertise the franchise just as money needs to be spent to attract new customers when opening a business. And then you have some franchise systems who spend money to advertise, but either they (i) do not have franchise marketing materials at all as supporting documents; or (ii) if they have franchise marketing materials they fall short and miss the mark.

It all ties together. The information on the franchise system’s website and in their franchise marketing materials must all be compelling and hit on topics that answer questions about the franchise opportunity (to learn more see “Understand the Responsibilities of a Franchisor and Franchise Marketing Collateral”). If the entire presentation is weak or lacks solid information, people will quickly lose interest and move on to something else. 

Often times franchise systems fail because of their process (or lack of processes) they have in place to qualify applicants (read about how we help guide and steer you in the right direction when it comes to awarding franchises). This could mean they are not fully engaged when talking with applicants to explain their program and address their concerns, have poor follow-up, etc. Franchise systems can also fall apart quickly simply because they end up bringing on anyone as a franchisee who can fog a mirror (or simply just has the money) resulting in under-qualified franchisees who do not succeed.

Disengaged Franchisees

Franchise systems do not always fall apart during their early years. The lack of re-investing in the business to grow the brand and make the system stronger leads to stagnation. If there is no effort made to provide ongoing value to existing franchisees this could result in disengaged franchisees. The best franchise systems strive to be “top of their game” and set the tone for their entire industry.

Relationships

Our President is famous for saying that “Franchising is a relationship business”. The bottom line is that a “hands-off” or “it will take off on its own” approach does not work with franchising (check out “Learn Why Franchising a Business Requires Your Involvement”). Franchise systems that do not foster a strong relationship with their franchisees and follow through on their obligation to support them (with mentoring, guidance, motivation and unsolicited help) may end up falling short resulting in disengaged franchisees and could lead to their demise.

Of course we cannot ignore the most recent epidemic that has led to failure.  This is when a business who is looking to franchise gets involved with the wrong company to help them (take a look at our President’s Warning Message about these companies). We have seen and heard about business owners who got suckered into a relationship (by a compelling salesperson) that led them down a path in which they ultimately lost control of their business, their brand and the franchisees they tried so desperately to acquire. This type of thing has been happening far too often and ends up destroying what could have been a promising franchise system.

When you work with The Franchise Maker to develop a franchise system, it’s important to know that we do everything we can to help you AVOID all these pitfalls. Not only do we work closely with you to build an attractive and affordable franchise program that you understand and can explain; we also teach you how to be a franchisor (learn about our strategy when franchising a business). Most importantly we teach you the value of re-investing in your franchise program, how to advertise for franchisees, how to qualify applicants and share with you best practices to keep your franchisees engaged, satisfied and happy. And yes, we have talent who can even create an arsenal of franchise marketing materials for you to use. The Franchise Maker is committed to putting only qualified business owners through the franchising process that contributes to the success of our economy. To learn more about becoming a franchise system visit our main website. Feel free to send us your contact information or call us directly at 1-877-615-5177 if you are interested in exploring how we can create a successful franchise system for you.